LOW DOC LOANS / ALT DOC LOANS
Verify Income in Alternative Way (typically used by Self-Emplyed)
Low Doc Loans (Low Documentation Loans) / Alt Doc Loans (Alternative Documentation Loans) are the ones available to who is not able to prove their income in the traditional way. For instance, self-employed people might not have their recent tax return and financial statements ready yet: low doc option might be the only option available.
As these home loans carry a higher risk, lender usually apply different conditions:
- higher interest rate,
- larger deposit requirement,
- borrowing a smaller percentage of the property value (usually 60% but some lender more)
- LMI (Lender’s Mortgage Insurance) applicable before the traditional borrowing limits (above 60% of the property value might start to be applied).
The main documents that can be used to verify the income are:
- letter of the account stating income,
- Business Activity Statements (BAS) proving turnover,
- bank statements proving your turnover,
- old tax returns,
- interim financial statements.
Business must have an ABN which has a GST registered for at least 2 years, but some lender will consider even 1 year ABN registration or less. In these cases, different conditions will be applied.